Samootin v Wagner

[2006] FamCA 432

[2006] FamCA 432

FAMILY LAW ACT 1975

IN THE FULL COURT      
OF THE FAMILY COURT OF AUSTRALIA                Appeal No EA136 of 2005
AT SYDNEY  File No SYF5191 of 1993

BETWEEN:

AS
Applicant Wife
- and -

GW
- and -
AH

11^TH and 12^th Respondents

REASONS FOR JUDGMENT

CORAM:  BRYANT CJ, KAY & COLEMAN JJ
DATE OF HEARING:                 3 May 2006
DATE OF JUDGMENT:             3 May 2006

APPEARANCES:  The Applicant Wife in person.

Ms Dawson of Counsel, instructed by Mallesons Stephen Jaques, Solicitors, Level 60, Governor Phillip Tower, 1 Farrar Place, Sydney NSW 2000, appeared on behalf of the Respondent Husband.

AS and GW and AH

EA136 OF 2005

CORAM:  BRYANT CJ, KAY & COLEMAN JJ

DATE OF HEARING:         3 May 2006

DATE OF JUDGMENT:     3 May 2006

Catchwords: FAMILY LAW – PROPERTY SETTLEMENT – BANKRUPTCY – Rights of creditors – Debts owed to third party creditors – Creditors owed monies on an unpaid costs judgment obtained in the Supreme Court of NSW – Appellant sought to rely on ss 90AF and 114 of the Family Law Act 1975 to prevent the commencement or continuance of bankruptcy proceedings against her by the creditors – Further by s 90AE the appellant sought to join the creditors as parties to pending property settlement proceedings against her former husband – The appellant sought that the judgment debts be taken into account in the property settlement, but accepted she alone had incurred them – Trial Judge’s finding that criteria governing the issuance of injunctions set out in ss 90AF(3) and (4) were not met was within discretion.

KAY J: 

1. This is an application seeking leave to appeal against orders made by the Honourable Justice Boland on 5 September 2005, wherein her Honour dismissed an application in a case filed by the appellant on 16 August 2005 and made an order that the appellant pay the respondents' costs of the proceedings as agreed and failing agreement as assessed.

1. Leave is required by reason of the provisions of s 94AA of the Family Law Act.  The relevant principles to be applied in respect of an application for leave to appeal can be found in the decisions of Rutherford v Rutherford (1991) FLC 92-255; 15 Fam LR 1, Adam P Brown Male Fashion Pty Ltd v Philip Morris (1981) 148 CLR 170, and Jackson v Fordham (1995) FLC 92-561; 18 Fam LR 336. There needs to be an error of principle and/or substantial injustice to one of the parties.

1. In the application that was dismissed by her Honour, the applicant, who it is convenient to refer to as “the appellant” in these proceedings, sought orders as follows:

“1.Pursuant to Section 90AE(1), Family Law Act 1975, Part VIII, orders are sought to join as third parties to the proceedings GW and AH. GW to be joined as the 11^th Respondent and AH to be joined as the 12^th Respondent.

2.Pursuant to Section 90AF1(b), Family Law Act 1975, Part VIII, injunction orders are sought to restrain GW and AH from commencing/continuing bankruptcy proceedings SYG 20 39/2005, Federal Magistrates Court of Australia, against the applicant wife, .

3.Pursuant to Section 90AE, 4(a), Family Law Act 1975, Part VIII, orders are sought to debit the applicant wife the taxation effect of the 11^th and 12 Respondents incurred in the proceedings 1973/01, Equity Division, Supreme Court - $155,522.69; and the Court of Appeal, Supreme Court, 41053/02 - $9,006.44 transferred to the Common Law Division, Supreme Court, 11966/05 $90,066.44; amounting to $164,529.13 as per the Application to set aside Bankruptcy Notice SYG 20 39/2005 Federal Magistrates Court of Australia at Sydney (which is attached and marked as Annexure “A” in the affidavit submitted with the application by the applicant wife).

4.        Any other orders as the Court may deemed fit to issue.

5.        Costs as orders by the Court.

6.That leave be granted for this application be served on Short Notice.”

1. The appellant has proceedings pending in this Court, seeking a property settlement against her former husband, and she has named another nine respondents to those proceedings.  She asserts that somehow the available property pool has been diminished by their conduct.  She has conducted proceedings in the Supreme Court of New South Wales, relating to allegations arising out of the conduct of various parties concerning property.  In the course of those proceedings she brought actions against the respondents to this appeal, who were her former solicitor and the successor in title to that solicitor's practice.  Those proceedings were dismissed and costs orders were made in favour of the respondents to this appeal, in a total of $164,529.13.  An appeal against the costs order was itself refused and an application to stay the execution of the costs order was made to the High Court of Australia, and it was declined.  There are still some proceedings in the High Court brought by the appellant in a number of applications in which she seeks special leave, arising out of various proceedings that she has brought form time to time.

1. The gravamen of her application before Boland J was to have the Family Court, when it comes to deal with the property proceedings, bring into account the debt she owes to the respondents to these proceedings and, in order to ensure that the property would be available for division, having taken that debt into account, she sought to restrain the respondents from enforcing their judgment, by bringing or commencing, or continuing bankruptcy proceedings.  In particular, she identified bankruptcy proceedings with file number SYG2039/2005 in the Federal Magistrates Court of Australia.  Those proceedings were, in fact, proceedings brought, it appears, by the appellant, to set aside the bankruptcy notice, rather than any proceedings that had been commenced by the respondents to this appeal.

1. She sought to rely upon the provisions of s 90AF of the Family Law Act which provides that the Court may make an order or grant an injunction under s 114, binding a third party. This section was introduced into the Act as part of the amendments inserted in 2003 that enable the Court to deal with debts owed to third parties, by distributing, effectively, the liability for those debts as between the parties to the family law proceedings, that is the husband and the wife, notwithstanding that the debts may have been incurred by one or other of them. There are a number of significant safeguards involved before the Court would interfere with third parties' rights, and they are set out in the provisions of Part VIIIAA of the Act.

1. In aid of the powers under Part VIIIAA, the Court can issue injunctions to restrain, effectively, the collection of the debt, either pending the proceedings or post the proceedings, but it must do so by giving consideration to the matters that are set out in ss 90AF(3) and (4). Those sections provide as follows:

“(3)      The court may only make an order or grant an injunction under subsection (1) or (2) if:

(a) the making of the order, or the granting of the injunction, is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage; and

(b) if the order or injunction concerns a debt of a party to the marriage—it is not foreseeable at the time that the order is made, or the injunction granted, that to make the order or grant the injunction would result in the debt not being paid in full; and

(c)the third party has been accorded procedural fairness in relation to the making of the order or injunction; and

(d)for an injunction or order under subsection 114(1)—the court is satisfied that, in all the circumstances, it is proper to make the order or grant the injunction; and

(e)for an injunction under subsection 114(3)—the court is satisfied that, in all the circumstances, it is just or convenient to grant the injunction; and

(f)the court is satisfied that the order or injunction takes into account the matters mentioned in subsection (4).

(4)      The matters are as follows:

(a)the taxation effect (if any) of the order or injunction on the parties to the marriage;

(b)the taxation effect (if any) of the order or injunction on the third party;

(c)the social security effect (if any) of the order or injunction on the parties to the marriage;

(d)the third party’s administrative costs in relation to the order or injunction;

(e)if the order or injunction concerns a debt of a party to the marriage—the capacity of a party to the marriage to repay the debt after the order is made or the injunction is granted;

Note:   See paragraph (3)(b) for requirements for making the order or granting the injunction in these circumstances.

Example:      

The capacity of a party to the marriage to repay the debt would be affected by that party’s ability to repay the debt without undue hardship.

(f)the economic, legal or other capacity of the third party to comply with the order or injunction;

Example:

The legal capacity of the third party to comply with the order or injunction could be affected by the terms of a trust deed. However, after taking the third party’s legal capacity into account, the court may make the order or grant the injunction despite the terms of the trust deed. If the court does so, the order or injunction will have effect despite those terms (see section 90AC).

(g)if, as a result of the third party being accorded procedural fairness in relation to the making of the order or the granting of the injunction, the third party raises any other matters—those matters;

Note:   See paragraph (3)(c) for the requirement to accord procedural fairness to the third party.”

1. It was common ground before the trial Judge that the appellant  acknowledged the debt that had been incurred as a result of the judgment was a debt of hers, and hers alone, and it was not one in which she was seeking any order from the Family Court of Australia that the liability for the debt ought to be shared by her former husband.  She was, however, anxious to ensure that the debt was to be taken into account by the Judge who would be hearing the property proceedings.

1. She said, in direct answer to her Honour, who was asking about what it was that she was asking the Court to do in her proceedings, as follows:

“HER HONOUR:     Well, if we were to alter the rights, are you asking that we would alter the rights so that instead of that being your sole debt that your former husband was responsible for part or all of that debt?

AS:  No, I am saying well, as far as I am concerned, I am the one who incurred the debt, but - - -

HER HONOUR:  So you accept that it is your debt?

AS:  I accept it is my debt---

HER HONOUR: Because what you are doing is - can I understand this, is what you are asking is that when the trial judge ultimately comes to hear the proceedings under section 79 of the Family Law Act, that he or she take that sum into account as a liability when calculating the pool of assets available for division between you and your former husband, is that what you're asking?

AS:  Yes, that is correct, your Honour.

HER HONOUR:  Right.  I think if is that is the case, then that would not be something, an order that I could deal with or make today.

AS:  No, your Honour.

HER HONOUR:  And I certainly couldn't bind the trial judge.”

1. So once it became apparent that the proceedings did not involve any concept of an alteration of the obligation to meet the debt due to the third party, then it became problematic as to whether or not power to even issue an injunction lay, but, even if the power lay, her Honour was clearly of the view that it would not be appropriate to exercise any such power, given the facts as they were outlined to her Honour.  After setting out other matters that are pertinent to the history of the matter, she said, at pars 52 to 54 of her judgment:

“GW and AH, who are complete strangers to the litigation in this Court, have a judgment of the Supreme Court of New South Wales which has not been stayed.  The stay application has been taken to the level of an application to the High Court of Australia and been refused.  They are entitled to the fruits of their judgment.

There is nothing in the wife's material to support a contention that this debt, even part of it, should be sheeted home to the husband in the s 79 proceedings.

I am satisfied, therefore, that the wife's application should be dismissed.”

1. The appeal before us is an appeal against a discretionary judgment. There is clearly express power under the Act to make an order that would restrain a person from commencing legal proceedings against a party to a marriage but, in so doing, the Court may only exercise that power if the criteria that are set out in ss 90AF (3) and (4) are met. One of the more important criteria is that the Court is to be satisfied that it is proper to make the order or grant the injunction.

1. For the reasons clearly expressed by her Honour in par 52, it would be almost impossible to argue that it was proper for an injunction to be made that would restrain the respondents to the application and the respondents to this appeal from enjoying the fruits of the judgment regularly obtained, in circumstances that really have nothing to do with the proceedings that are pending before this Court or the relationship between the husband and the wife, nothing in any direct sense.

1. As this is an appeal from a discretionary order, unless it can be shown that there has been a material error of fact or a misapplication of the law or the reaching a result that is clearly unjust, then the appeal must fail.  Notwithstanding the earnest endeavours of the appellant to persuade us that such an error exists, nothing that she has put before us, in my view, ought persuade this Court that her Honour fell into any error at all.

1. There are one or two matters in the judgment that are perhaps said under a mistaken belief as to what it was that was actually being sought in the Federal Magistrates Court.  There is a reference by her Honour to the issue as to whether or not the injunction applied to the continuation of existing proceedings, when, indeed, those proceedings were not proceedings brought by the respondents themselves.  They would not be continuing any existing proceedings, they would be resisting them. 

1. That confusion is perhaps brought about by the nature of the application that identified the proceeding that had been brought by AS as the one about which she sought the injunction.  However, that does not appear to be a material error, insofar as her Honour directed herself back towards the provisions of the enabling section, and looked to the various criteria that she was to take into account before determining whether or not it would have been appropriate to grant an injunction or to restrain the commencement of the proceedings, which, we are informed, by consent, have indeed been commenced; that is the bringing of a petition for bankruptcy since the injunction was refused by Boland J.

1. In the circumstances, in my view, the appeal ought to be dismissed. 

1. I want to add that there is a little bit of confusion about the appropriate procedure that accompanies the application itself. One of the orders that was sought was the joinder of the parties, said to be pursuant to s 90AE of the Act.

1. The Act really does not make provision for the joinder of parties. It provides for the Court to make orders against third parties, that is under s 90AE and it provides that they must be accorded procedural fairness in relation to the making of the orders. So that, if an application names them as parties, they effectively become parties to the proceedings. The Family Law Rules 2004 set out some of the circumstances in which applications may be issued out of time or after the proceedings have reached a certain stage, and, in some circumstances, that requires the leave of the Court for the addition of a party.

1. I am not absolutely certain in this case whether any leave was ever required for the applicant to seek to have the respondents added as parties.  She may have been entitled to have them as parties as of right but the addition of them as a parties as of right would entitle them to apply to be removed as parties to the case.  Effectively, that is what has happened in the proceedings before Boland J, if not in form then certainly in substance.  There was nothing in the nature of the application that was brought that would have made it appropriate to have the respondents to this appeal remain in the property proceedings before the Family Court of Australia that are presently pending between the husband and the wife.

1. For the reasons that I have indicated, I would dismiss this application.  No error of principle or substantial injustice has been demonstrated.  .

BRYANT CJ:

1. I agree with the reasons delivered by Kay J and the orders that he proposes, and have nothing further to add.

COLEMAN J:

1. I agree that the application should be dismissed for the reasons Kay J has given.  I have nothing to add.

KAY J: 

1. The orders of the Court will be:

1.        The application for leave to appeal filed 4 October 2005 is dismissed;

2.        The respondents advise the applicant and the Court, in writing, within seven days of the sum sought for costs of the application;

3.        The applicant be at liberty to file and serve any written submissions on the costs issue within 14 days of receipt of the respondents' advice;

4.        The question of costs otherwise be reserved.

I certify that the 23 preceding
 paragraphs
are a true copy of the reasons
for judgment delivered by this
Honourable Full Court.

 Associate